Management of the UCB invention portfolio is split between OTT and
the campus Office of Technology Licensing (OTL). Most UCB inventions in
the OTT portfolio were disclosed prior to establishment of Berkeleyís OTL.
OTT continues to receive some new UCB disclosures when multiple UC campuses
are involved or when the technology is closely related to one already administered
by OTT.

For OTT-managed cases, the overall level of basic patent and licensing
activity remained relatively stable from FY96 to FY97.

Nearly 75% of adjusted gross income for OTT-managed cases and most
of the $370,000 increase in income was attributable to two inventions.
Fluorescent Conjugated Probes generated earned royalties of $921,000 in
FY97, an increase of $136,000 over FY96. Weighted Capacitor Converter,
an older invention that did not generate income in FY96 and has now expired,
earned $163,000 in FY97 due largely to a one-time settlement for past-due
royalties. Income from a third invention, Indicator Dyes for Calcium Ions,
increased slightly to $109,000.

For OTT-managed cases, net patent prosecution expenses decreased by
nearly 90% to only $24,000 in FY97. However, the University also spent
$331,000 defending itself in ongoing litigation related to a 1986 invention.
These litigation costs were not recoverable, thus total net legal expenses
increased in FY97. The State share increased as a result of the increase
in income. However, UCBís share of OTT operating expenses decreased substantially
due to resolution of several complex licensing matters that previously
required a commitment of staff time.

Campus-based activity continued to increase as the OTL invention portfolio
grew in size. The number of new inventions disclosed to OTL increased by
28% in FY97 and the number of initial patent filings nearly tripled. Some
of the new license agreements issued included monies to support ongoing
campus research. Three new start-up companies were created based on licensed
technologies and three licensing agreements also included equity terms.

Adjusted gross income for OTL cases grew by 37% to $868,000 in FY97.
Increased patent activity contributed to a $319,000 rise in net legal expenses.
A substantial portion of these expenses will be recovered from licensees
whose reimbursements had not yet been received by the end of the fiscal
year. Operating expenses increased by 17% to $543,000 while the State share
dropped by $34,000.

After all expenses and distributions, net income for OTT-managed cases
increased from $61,000 in FY96 to $344,000 FY97. The campus also was allocated
a portion of interest earnings totaling $6,500, bringing the net campus
FY97 distribution to nearly $351,000. During the same period, there was
a 65% increase in net loss incurred by OTL.

The first section of the Annual Report does not cover activity of OTLís
software program. However, the separate financial statement below shows
that although software income decreased by $20,000 to $94,000 in FY97,
a $27,000 reduction in operating costs resulted in an increase in net income
to $45,000 for the program.